On Wednesday, the Congressional Budget Office (CBO) released its Monthly Budget Review (MBR) for the month of June, providing a review of the federal budget through the first nine months of fiscal year 2010. It seems that revenues were about the same as they were last year at this time, but spending was down about 3 percent. These factors have combined to provide the country with a roughly $1.0 trillion deficit so far this year, which is "about $80 billion less than the shortfall last year at this time."
Writing of the report in his blog, CBO Director Doug Elmendorf explains that although corporate income tax receipts are up roughly 31 percent from last year at this time – due to both improved economic conditions and lower depreciation charges – decreases in individual income and payroll taxes largely offset the gains in corporate tax revenue.
CBO accounts for the decrease of individual and payroll taxes by $57 billion, or roughly 4 percent from this time last year, in two ways. First, taxes were lower: "nonwithheld payments reflecting 2009 tax liabilities were lower." And, second, the economy is still very weak, which means withheld taxes are down as well.
On the spending side, the government spent $2.6 trillion, "about $70 billion less than outlays at the same point in 2009." Though spending through the Troubled Asset Relief Program (TARP), and a few other programs related to the recent financial crisis, declined, all other spending rose by almost $280 billion:
Payments of unemployment benefits increased by $41 billion (or almost 50 percent) and interest on the public debt was up by about 20 percent. Outlays for Medicaid rose by 9 percent, and defense spending and payments of Social Security benefits were both 6 percent higher. Spending for food and nutrition assistance, the State Fiscal Stabilization Fund (created by the American Recovery and Reinvestment Act), student aid, and refundable tax credits also increased significantly.
As Congress’ nonpartisan abacus, CBO can’t and won’t make any distinction between the different kinds of spending above. But it should be noted that some of those outlays were a very good thing indeed. The increase in unemployment benefits, food and nutrition assistance, and the State Fiscal Stabilization Fund all helped to ease the impact of the worst economic downturn since the Great Depression. You could even make the argument, convincingly I would add, that spending on those programs helped to keep the Great Recession from becoming a depression.
The problem is that much of that spending is going to dwindle to nothing over the next year or so, and we’re still facing exceptionally rough economic conditions that further spending would help to alleviate.